Plaintiff argues that the Army failed to
evaluate Spectrum’s professional employee
compensation plan in accordance with the requirements of the
professional services clause found
at FAR § 52.222-46, which was incorporated by reference into the
RFP. The latter clause “is
required to be inserted in RFPs for contracts expected to exceed
$500,000 when the service to be
provided ‘will require meaningful numbers of professional
employees.’” Statistica, 102 F.3d at
1579 (quoting 48 C.F.R. § 22.1103); see also K-Mar Indus. Inc.
v. United States, 91 Fed. Cl. 20,
23 (2010). Plaintiff contends that had the Army performed the
required evaluation, it would have
discovered serious problems with Spectrum’s compensation plan.

The subject clause states that “lowering
the compensation (salaries and fringe benefits)
paid or furnished professional employees” can be “detrimental in
obtaining the quality of
professional services needed for adequate contract performance.”
48 C.F.R. § 52.222-46(a). To
avoid this detriment, the clause requires offerors to “submit a
total compensation plan setting
forth salaries and fringe benefits proposed for the professional
employees who will work under
the contract.” Id. This paragraph further indicates that “[t]he
Government will evaluate the plan
to assure that it reflects a sound management approach and
understanding of the contract
requirements.” Id. It goes on to provide that “[t]his evaluation
will include an assessment of the
offeror’s ability to provide uninterrupted high-quality work” as
well as the plan’s “impact upon
recruiting and retention, its realism, and its consistency with
the total plan for compensation.” Id.
The clause states that “[s]upporting information will include
data, such as recognized national
and regional compensation surveys and studies of professional,
public and private organizations,
used in establishing the total compensation structure.” Id.5
While noting that compensation
levels in a proposal may be lower than those of predecessor
contracts, the clause explains that
such reductions “will be evaluated on the basis of maintaining
program continuity, uninterrupted
high-quality work, and availability of required competent
professional service employees.” Id. at
§ 52.222-46(b). “[L]owered compensation for essentially the same
professional work,” the
clause cautions, “may indicate lack of sound management judgment
and lack of understanding of
the requirement,” id., adding that “[p]rofessional compensation
that is unrealistically low or not
in reasonable relationship to the various job categories, since
it may impair the Contractor’s ability to attract and retain
competent professional service employees, may be viewed as
evidence
of failure to comprehend the complexity of the contract
requirements,” id. at § 52.222-46(c).

The purpose of the review envisioned by
this clause is “to evaluate whether offerors will
obtain and keep the quality of professional services needed for
adequate contract performance,
and to evaluate whether offerors understand the nature of the
work to be performed.” Innovation
Mgmt., Inc., 2003 C.P.D. ¶ 209 (2003); see also ELS, Inc., 99-2
C.P.D. ¶ 92 (1999); Research
Mgmt. Corp., 90-1 C.P.D. ¶ 352 (1990). In this regard, the
clause is designed to afford
professional services employees protections mirroring those
afforded other workers under the
McNamara-O’Hara Service Contract Act of 1965 (SCA), Pub. L.
89-286, 41 U.S.C. § 351, et
seq.6 The primary purpose of the SCA is to protect “wage
standards of employees” by preventing
“federal purchasing power [from] playing a role in suppressing
wage rates,” with particular
emphasis given to the impact of that power in rebiddings and
successor contracts. Ft. Hood
Barbers Ass’n v. Herman, 137 F.3d 302, 309 (5th Cir. 1998)
(citing H.R. Rep. 89-948, at 2-3
(1965); S. Rep. No. 89-798, at 3-4 (1965)); see also Gray v.
Int’l Bhd. of Elec. Workers, 868 F.2d
671, 677 (4th Cir. 1989).

Plaintiff asserts that the “plain language”
of this clause “required the Army to compare
the offerors’ proposed compensation levels to those paid under
the predecessor contract.”

Although not exactly plain, the clause’s
language certainly infers the need for such a comparison
as it requires the agency to perform additional analysis when an
offeror’s compensation levels are
lower than those paid by the incumbent. Paragraph (b) of the
clause thus indicates that
“proposals envisioning compensation levels lower than those of
predecessor contractors for the
same work will be evaluated on the basis of maintaining program
continuity, uninterrupted highquality
work, and availability of required competent professional
service employees.” 48 C.F.R.
§ 52.222-46(b). To be sure, these requirements overlap somewhat
with those in paragraph (a).
The latter, after all, requires the agency to evaluate for every
proposal (and not just those
proposing lower professional compensation), an offeror’s
compensation plan to assure that it
reflects “sound management” and an understanding of the contract
requirements. Both
paragraphs, moreover, require the agency to assess the offeror’s
ability to provide “uninterrupted high-quality work,” as well as
the impact the proposed compensation will have on recruitment
and retention.

That said, the mere existence of paragraph
(b) suggests that the drafters of the FAR
intended agencies to perform more analysis when a recompetition
of an existing contract occurs,
with the obvious goal of promoting a smooth transition from one
contract to the next. In
particular, unlike paragraph (a), paragraph (b) importantly
requires the agency to consider the
impact of lowering salaries on “maintaining program continuity.”
Accordingly, on balance, it
appears that an agency is obliged to make the threshold
comparison described in paragraph (b), in
order to determine whether it must conduct the further analysis
of compensation plans required
only for recompetitions.

This view finds support in OMV Medical,
Inc. v. United States, 219 F.3d 1337 (Fed. Cir.
2000), where the Federal Circuit interpreted a predecessor
version of the clause in question, see
48 C.F.R. § 52.222-46 (1998). By way of prelude, in that case,
this court had held that it was
irrelevant whether the Air Force had rationally compared the
offerors’ salary levels with those of
the incumbent as the agency had instead determined that the
salaries in the compensation plans
were not unduly low relying on the median salaries listed in the
Bureau of Labor Statistics 1998-
1999 Occupational Outlook Handbook (the Occupational Outlook
Handbook). OMV, 219 F.3d
at 1343. The Federal Circuit, however, reversed and remanded the
case. It held that the
professional services clause required the agency to make two
separate determinations:

(1) a determination of whether each
offeror’s compensation package was
generally consistent with the salaries being paid by the
incumbent contractor; and
(2) a determination of whether each offeror’s compensation plan
was realistic, i.e.,
whether it indicated that the offeror understood the scope of
the work.

Id. at 1343. The first component of this
analysis, the court stated, “was designed to ensure that
the incoming contractor would not experience a large turnover in
the program workforce because
of a significant reduction in salary levels,” while the second
was “to determine the general level
of compensation for equivalent positions.” Id.

The Federal Circuit held that the agency’s
findings under the second prong of the
analysis, which relied upon the Occupational Outlook Handbook,
were no substitute for the
specific comparisons required by the first prong, reasoning:

Because the [agency] designed the two
components to serve different purposes
and arranged for them to be calculated differently, the method
the agency used to
address one component is not interchangeable with the method
used to address the
other. Thus, an offeror’s salary levels could be consistent with
the Occupational
Outlook Handbook, indicating that the offeror had a reasonably
clear idea of the
level of compensation it would have to pay in order to obtain
employees to
perform the work of the contract, yet those salary levels might
still be sufficiently
far below the incumbent’s salary levels that the incoming
contractor would be
likely to experience an unacceptably large staff turnover and
loss of program
continuity.

Id. While recognizing that the agency need
not make the required comparison “with impeccable
rigor,” id. at 1344, the Federal Circuit, nonetheless, remanded
the case for a determination as to
whether the analysis made by the Air Force in awarding the
contract was rational. OMV thus
holds that, under the professional services clause, an agency
must compare the incumbent’s
compensation to that proposed by the offerors as a prelude to
determining whether further
analysis of the offerors’ compensation plan is required.

A careful search of the contemporaneous
administrative record reveals no indication
whatsoever that anyone at the Army focused upon the requirements
of this professional services
clause during the evaluation process. Perhaps, the clause, which
was only incorporated by
reference in the RFP, was overlooked. Nevertheless, defendant
argues that the Army backed into
the required analysis while addressing other requirements in the
solicitation. It attempts to baste
together various snippets snatched from the evaluation papers
and galvanize them into a set of
findings that supposedly addresses the requirements of the
professional services clause. In
theory, defendant can attempt this multi-organ transplant
because the failure strictly to comply
with the clause provides a basis for setting aside the award
here only if prejudicial – and the latter
cannot be the case if the agency, in fact, performed the
required analysis, even for other reasons.
The result of this Promethean surgery need not be pretty. But,
it must, in the end, yield (or
constitute) the required analysis and findings – and here it
does not.

Seeking to avoid this conclusion, defendant
begins by quoting OMV’s admonition that the
required comparison need not be made with “impeccable rigor.”
219 F.3d at 1344. Defendant
argues that the Army did all that was required when it compared
the compensation figures in
Spectrum’s compensation plan to those proposed by plaintiff.
But, this comparison is not the one
envisioned by the FAR – the latter requires, instead, that the
agency compare the offeror’s
compensation plan to the compensation actually being paid by the
incumbent contractor. In some
instances, distinguishing, for this purpose, between the
incumbent’s actual and offered
compensation might prove important. For one thing, there is no
assurance that the incumbent’s
compensation plan for the new contract, forged in the face of
renewed competition, will provide
for the same compensation it is paying on the old contract. But,
this is not a problem here, as the
compensation levels reflected in plaintiff’s plan were the same
as it was paying its employees
under the bridge contracts. Accordingly, there can be no
prejudice associated with defendant’s
failure to obtain and use the actual compensation being paid by
CRA under the bridge contract,
for it essentially had the same numbers.

So how were these comparisons made? The
Army compared the labor rates for all the
employment categories reflected in the offerors’ compensation
plans. To illustrate this,
defendant points to a set of charts that were attached to the
pricing reports. It also relies upon a
slide used at the SSA briefing on August 27, 2009, prior to the
second round of evaluations,
which contains a chart comparing the offerors’ labor rates for
professional categories such as
“family practice physician” and “orthopedic surgeon,” as well as
for nonprofessional categories
such as “medical clerks” or “appointment clerks.”9 Commenting on
this slide in his December 24, 2009, source selection decision,
the CO noted that some of these comparisons favored
Spectrum, while others favored CRA. In this decision, the CO
ultimately found that “[o]verall
there were no significant differences between the Spectrum and
CRA proposals when taking into
consideration bonuses, escalation, and fringe benefits.”

The critical word in this sentence is
“overall.” As plaintiff notes, rather than focusing
upon the professional services categories, the CO apparently
looked at the average results over all
the labor categories and, in the process, failed to determine
whether Spectrum’s plan
“envision[ed] compensation levels lower than those of the
predecessor contractors for the same
work,” as required by paragraph (b) in the professional services
clause.

(sections deleted)

Had the Army done what it was supposed to
do and focused on the professional services
categories, it would have found that a significant number of
professionals were going to be paid
less by Spectrum than what comparable professionals had received
working for CRA. And had it
so found, the Army would have been obliged to conduct the
recompetition analysis required by
paragraph (b). See Gen. Dynamics One Source, LLC, 2010 C.P.D. ¶
45 (2010) (agency realism
analysis defective where agency failed to evaluate proper set of
labor rates in evaluating
awardee’s compensation plan).11 Defendant again contends that
the Army, in fact, conducted this
analysis, albeit while performing the analyses required by other
clauses of the RFP. But, at this
point, the bolts, sutures and other paraphernalia that defendant
employs to truss together a proxy
for the review required by the professional services clause
begin to come apart.

Recall again that under paragraph (b) of
the professional services clause the Army was
obliged to evaluate the proposals “on the basis of maintaining
program continuity, uninterrupted
high-quality work, and availability of required competent
professional service employees.” FAR
§ 52.222-46(b). Defendant asserts that the Army did this in
conducting the technical evaluation
of the parties’ compensation plans. But, the record demonstrates
otherwise. For one thing, the
SSEB, which was charged with evaluating the technical proposals,
could not have considered the
impact of Spectrum’s lower compensation on its ability to
maintain program continuity and
uninterrupted work, as well as the availability of required
competent professionals, as it was walled off from any labor
cost information and thus did not know how Spectrum’s compensation
compared to that offered by CRA.12 The RFP prohibited offerors
from including any cost or
price information in the technical portion of their compensation
plan – the instructions for
submitting technical proposals emphasized, in no uncertain
terms, “DO NOT INCLUDE pricing
information in the Technical Approach proposal” (emphasis in
original) and indicated that, even
under Subfactor 1C, dealing with compensation, the offerors were
to describe the elements of
their plan “excluding cost/price information.” In conformity
with these instructions, the
compensation plans supplied by the parties as part of their
technical proposals spoke only in
terms of generalities – indicating how, for example, their
compensation compared to the national
and capital region markets and the methods they would use to
recruit and retain qualified
personnel.

As the SSEB could not review what it did
not have, it should come as little surprise that
nothing in the technical evaluation worksheets or various
composite reports focused on how
Spectrum’s proposed compensation would impact program continuity
and the availability and
retention of qualified professional employees, either at the
outset of the contract or over time.
Those comments regarding compensation, instead, focused only on
benefits (e.g., whether
insurance or a uniform allowance was given) and how the offerors’
overall compensation ranked,
in percentile terms, in the market (e.g.,[] percentile). And
this general focus was maintained
even though questions regarding Spectrum’s compensation numbers
were begged by: (i) the fact
that it intended to hire many of CRA’s former employees; and
(ii) a number of technical
evaluators who expressed concerns that Spectrum’s professional
compensation, as compared to
the NCA marketplace, might be too low.13 As such, these comments
on the technical proposals did not address the issues raised by
the compensation clause. Cf. OMV, 219 F.3d at 1343
(holding that the agency’s comparison of the offeror’s
compensation to Bureau of Labor statistics
was “not interchangeable” with an analysis of the impact of
lower compensation levels). Nor is
there any indication that the CO’s initial price evaluation
considered the impact of Spectrum’s
lower compensation in evaluating its proposal in terms of
continuity of service, recruitment and
retention, etc., as to professional employees – even though a
slide from the June 29, 2009, SSA
briefing cautioned that the CO felt that Spectrum’s “[p]rice is
too low.”

This latter fact serves to emphasize that
the only Army officials poised to conduct the
analysis required by the professional services clause were the
CO and the SSA. Only they had
access to both the technical and price proposals, as well as the
corresponding evaluations, and
thus could assess the impact of pay on recruitment and
performance. But, there is no indication
that either of them conducted the required analysis.14 Indeed,
the first (and only) mention of any
evaluations relating to the professional services clause are in
the CO’s statement filed with the
GAO, addressing the claims made by plaintiff in its protests. In
this statement, the CO admitted
that he had not compared the offerors’ compensation to the
current salaries being offered,
asserting that “this is not a requirement of the [clause].”
Rather, he indicated that –

What I did include is a requirement in
Paragraph 1c of Section L of the
solicitation, an evaluation of the basis of all labor rates to
include survey data and
other sources of proposed salaries and wages. This was evaluated
by the SSEB
and is found in the evaluation forms . . . .

As for recruitment and retention, both
salary data and fringe benefits were
reviewed of both proposals. Overall the fringe benefits offered
by both offerors
were similar. One noted difference was that CRA was offering [],
while Spectrum
was offering []. I concluded that CRA, as the incumbent, did not
propose
professional compensation lower than the current rates. As
Spectrums [sic] proposal was comparable to CRA’s proposed rates,
I concluded that Spectrum’s
rates were realistic.

The reference above to the SSEB, of course,
is to the board’s evaluation of the technical
proposal, which, as already demonstrated, could not have
addressed the inquiries required by the
professional services clause. The CO’s further assertion that
“CRA, as the incumbent, did not
propose professional compensation lower than the current rates”
is contradicted not only by the
chart above, but also by the CO’s admission earlier in his
statement that he “did not obtain the
current rates being paid by CRA” because he viewed the
information as “proprietary” and
because the clause did not require him to “compare [the
compensation plan] to the current
salaries being offered.” Moreover, on brief, defendant flatly
admits that Spectrum’s professional
compensation was lower than that being offered by CRA.
Accordingly, while the CO contended
to the GAO that he had complied with the clause, that assertion
is demonstrably untrue.

Even if the CO’s statement was not
contradicted by the record, this court would be loath
to afford it any weight in determining whether the agency
complied with the FAR. Other courts
conducting APA reviews have limited their consideration of an
agency’s decision to the analysis
and rationale appearing in the administrative record as of the
time of the decision, holding that
“[a]ny post hoc rationales an agency provides for its decision
are not to be considered.” Gen.
Elec. Co. v. Dept. of Air Force, 648 F. Supp. 2d 95, 100 (D.D.C.
2009) (citing McDonnell
Douglas Corp. v. U.S. Dept. of Air Force, 373 F.3d 1182, 1187
(D.C. Cir. 2004)). This approach
serves to reenforce the agency’s obligation to “examine the
relevant data and articulate a
satisfactory explanation for its action including a ‘rational
connection between the facts found
and the choice made.’” Motor Vehicle Mfrs. Ass’n of U.S., Inc.
v. State Farm Mut. Auto Ins. Co.,
463 U.S. 29, 43 (1983) (quoting Burlington Truck Lines v. United
States, 371 U.S. 156, 168
(1962)). And the agency must discharge this duty before, not
after, it renders a decision. See,
e.g., 210 Earll, L.L.C., 77 Fed. Cl. at 721 (“The APA requires a
reasoned analysis at the time of
the decision.”). Indeed, in Citizens to Preserve Overton Park v.
Volpe, 401 U.S. 402 (1971), the
Supreme Court eschewed relying upon affidavits produced by the
agency involved describing
how the Secretary of the Interior had reached a particular
decision, describing them as “‘post hoc’
rationalizations, . . . which have traditionally been found to
be an inadequate basis for review.”
Id. at 419 (citing Burlington Truck Lines, 371 U.S. at 168-69;
SEC v. Chenery Corp., 318 U.S.
80, 87 (1943)); see also Pension Benefit Guar. Corp. v. LTV
Corp., 496 U.S. 633, 653-54
(1990).

Now, there are differences between the
affidavits rejected in Overton Park and the post
hoc assurances made by the CO here – the former constituted a
new rationale for an old decision;
the latter a naked claim that the agency relied upon a rationale
previously undisclosed. But, the
healthy dose of skepticism administered by Supreme Court in
Overton Park still seems warranted
here. In both instances, the agency’s post-decision conduct is
expedient – confronted with an
attack on its decision, the agency offers a new explanation, in
one instance, and cites a previously
undocumented rationale in the other. Additionally, in both
instances, allowing that explanation
to act as a gap filler – to allow the agency to complete “an
unfashioned creature[], but half made
up”16 – would frustrate effective judicial review under the APA
standards. After all, an essential
premise of such review presupposes that the agency will
establish its rationale at, or prior to, the
time of its decision – not after. Indeed, it should not be
overlooked that the CO’s statement in
question was part of the agency’s response to the protest and
was intertwined with legal briefs
filed by agency counsel defending the award. See 31 U.S.C. §
3553(b)(2) (requiring the agency
to make this filing). In purpose and effect, then, there is
little to distinguish that statement from
arguments made by attorneys in briefs. Yet, on the latter count,
it is a well-accepted that such
arguments are no substitute for the agency’s contemporaneous
articulation of the basis for its
decision. See Fed. Power Comm’n v. Texaco, Inc., 417 U.S. 380,
397 (1974) (“[W]e cannot
‘accept appellate counsel’s post hoc rationalizations for agency
action;’ for an agency’s order
must be upheld, if at all, ‘on the same basis articulated in the
order by the agency itself.’”
(quoting Burlington Truck Lines, 371 U.S. at 168; Chenery, 332
U.S. at 196)).17 And such also
should be the case with the CO’s statements here.

Why include such statements in the record
at all? The answer is found in 31 U.S.C.
§ 3556, which requires the court to treat the report containing
that statement “as part of the
agency record subject to review.” But, nothing in this statute,
or any other authority, for that
matter, requires the court to give the CO’s statement any
independent, let alone dispositive,
weight. That was the holding in Cubic Applications, Inc. v.
United States, 37 Fed. Cl. 339, 343 (1997), where, as here,
defendant attempted to bootstrap its case by relying upon
reports filed by
agency contracting officials in a GAO protest. Rebuffing that
effort, this court explained –

Attached to the second agency report are
also the newly-created statements of
[the] chairman of the Source Selection Advisory Council for this
contract, and
[the] chairman of the Source Selection Evaluation Board for this
contract. In the
absence of a GAO record, these are the types of materials that
the court would not
receive or solicit, absent some need to supplement the agency
record. To the
extent they purport to provide new evidence in support of the
agency decision,
they would normally come too late. To the extent they point to
the record at the
agency, they are, in substance, argument. They are useful, but
innocuous, because
they are only a guide to documentary justification already in
existence. By statute,
however, the court is directed to treat all these materials as
part of the record. See
31 U.S.C. § 3556. The court has no choice but to do so. It does,
nevertheless,
have a choice about the degree of relevance to assign to them.
As the court
explained during oral argument, absent some other basis to
consider these
post-decisional materials, it will view them, not as evidence,
but as argument.
Their only potential utility, other than as a key to the agency
record, is to
demonstrate what issues were raised or not raised at the GAO.

Id. at 343-44. Cubic teaches that post hoc
statements submitted to GAO, such as the CO’s
statement here, should have no office beyond summarizing what
the administrative record
already reveals. And this court agrees. Documents like these are
not salvific – they can neither
fill in gaps in the agency’s reasoning for an award nor supply
missing documentation of that
reasoning. See Mike Hooks, Inc. v. United States, 39 Fed. Cl.
147, 158 (1997) (documents
submitted by procuring official during GAO protest treated not
as evidence, but as argument).

This is especially the case, of course,
where the claims made in such statements are conclusory in
nature and not only unsupported by the record, but contradicted
thereby.

To put it bluntly, in this proceeding, the
CO’s statement “ha[s] a ticket of admission, but
to the very cheapest seats of probative value.”20 Contrary to
his claims, there is no indication the
Army conducted the analysis required by FAR § 52.222-46 – it did
so neither during the
technical evaluation, nor during the price evaluation, nor in
making the source selection decision.
Cobbling these analyses together avails defendant naught – in
government contracts, as in
algebra, 0 + 0 + 0 ?1. The Army’s failure to comply with the
clause constituted a departure from
the evaluation criteria specified in the solicitation and,
correspondingly, a violation of both the
FAR and the Competition in Contracting Act. See 10 U.S.C. §
2305(a)(2)(A)-3(a); 48 C.F.R. §§
15.303(b), 15.305(a); see also Banknote Corp., 56 Fed. Cl. at
386 (“It is hornbook law that
agencies must evaluate proposals and make awards based on the
criteria stated in the
solicitation.”). Before considering the prejudice associated
with these errors, the court will turn
to plaintiff’s remaining contentions. (CRAssociates,
Inc. v. U. S. Spectrum HealthCare Resources, Inc., No.
10-339C, October 20, 2010) (pdf)